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Dec 5, 2013 7:00pm EST
george w. bush's economic advisor, now professor at stanford university. welcome back. gdp report today surprisingly strong, up 3.6% at an annual rate for the third quarter. however, there is always a however on this, much of it was unexpected boost to inventories, non-farm inventories, up almost $60 billion. people say that's not sustainable and therefore, the 3.6% is not sustainable. where do you come out on that? >> i think that's actually not right. i think the 3.6% may not be sustainable but it has very little to do with inventories. in fact, what you find is if you look at changes in inventories in one quarter, they tend to predict in a positive direction, not a negative direction what's going to happen in the next quarter. in other words, you have a good quarter for inventories, you're more likely to have a good quarter next quarter, not a bad quarter. the reason for that is that the inventories are essentially forecasting where the economy's going in the future. if the economy is heating up, manufacturers need to produce goods so that they have them on board when the economy is
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